U. S. Stocks

U.S. stocks slumped as a surge in Italian bond yields put the spotlight back on euro-zone sovereign-debt issues. Leading the declines were financial and materials stocks. J.P. Morgan Chase fell 5.9% and Bank of America declined 4.4%. Hewlett-Packard was also weak, shedding 5.4%, while Alcoa was off 5.2%.

Morgan Stanley, which fell in September due to fears about its exposure to French banks, tumbled 8.3%. The investment bank said it has $1.79 billion in net country risk exposure to Italy, a category that includes obligations from corporations and banks in addition to sovereign debt. Adding to the uncertainty, some headlines suggested Greece's transfer of power may be far from a done deal, as investors had thought.

The defensive sectors that are less sensitive to economic conditions fared better, with telecommunications, utilities, consumer staples and health-care stocks limiting the damage. Just two of the S&P 500 stocks were in positive territory, led by Best Buy's 1.7% gain. European stocks also finished lower.

The Stoxx Europe 600 lost 1.7%, Germany's DAX index fell 2.2% and Italy's FTSE MIB index dropped 3.8%. Italian bond yields soared to euro-era highs after clearinghouse LCH.Clearnet Group raised the margin required to trade Italy's government bonds. The yield on the benchmark 10-year bond rose above 7%.

Gold futures slipped, while oil prices fell to about $95.74 a barrel. Treasurys surged, pushing the yield on the 10-year note below 2%, to 1.964%. In economic news, U.S. wholesale inventories in September fell. In corporate news, General Motors lost 9.7% after the automobile maker provided a downbeat outlook, citing deteriorating economic conditions.

Adobe Systems sank 7.8% after the company said it would cut 750 jobs as part of a restructuring plan and provided a lower than expected revenue outlook. Ralph Lauren fell 7% after the high-end apparel maker missed earnings expectations while raising its outlook for the full year. Retailer Macy's fell 5% as third-quarter earnings jumped, but its profit margins narrowed more than Wall Street expected.

Take-Two Interactive Software edged down 0.5% after the games maker reported better than expected fiscal second-quarter results but provided a somewhat downbeat earnings outlook. Universal Display gained 1.6% after reporting better than expected third-quarter results, while STEC dropped 16% after the company's disappointing fourth-quarter outlook. Cisco Systems fell 3.8%. The networking company is slated to disclose fiscal first-quarter results after the closing bell.

European Stock Markets

European stock markets dropped sharply Wednesday as Italy's bond yields soared after clearing house LCH.Clearnet raised the margins required to trade Italian government bonds. In Milan, the FTSE MIB index finished the day down 3.8% to 15,071.77.

The 10-year Italian-government-bond yield rose above the critical 7% level following the announcement from LCH.Clearnet. The volatility comes on the heels of embattled Silvio Berlusconi's decision Tuesday to resign as prime minister pending the Italian parliament's approval of austerity measures.

Shares of Mediaset SpA, controlled by Berlusconi, dropped 12% in Milan. The broadcasting firm reported a drop in nine-month earnings and said it expects lower net profit in 2011. Italian banks also fell, with shares of Intesa Sanpaolo SpA down 4.3% and Mediobanca shedding 4%.

The Stoxx Europe 600 index closed down 1.7% to 236.34, with Wall Street clearly affected by another tumultuous day in Europe. In Greece, meanwhile, outgoing Prime Minister George Papandreou said the country will implement its latest bailout plan, but failed to name his replacement.

Compared to the rest of Europe, selling in Greece was less intense, with the ASE Composite Index down 1.6% to 767.11, led by a 6.5% drop for National Bank of Greece SA. Across the rest of Europe, Spain's IBEX 35 index slipped 2.1% to 8,340.60, France's CAC-40 index fell 2.2% to 3,075.16 and Germany's DAX 30 index dropped 2.2% to 5,829.54. Financials accounted for the lion's share of Europe's losses, with Commerzbank AG down 6.1% in Frankfurt, insurer Allianz SE losing nearly 5% and Deutsche Bank AG sliding 4.4%. One of the few gainers was Deutsche Post AG, which rose 3.8%.

The company raised its full-year earnings forecast as it reported a 2.5% increase in group revenue for the third quarter and 18.5% growth in earnings before interest and taxes, driven by strength in Asia markets and continued expansion in Internet retail shipping. In Paris, away from the main index, shares of geophysical services company CGG Veritas SA rose nearly 7%, making it the top gainer for the Stoxx 600. The company reported a profit of $41 million in the third quarter against a loss of $33 million in the year-ago period, and said it was confident of meeting 2011 objectives.

On the CAC-40, Societe Generale SA skidded 3% and BNP Paribas SA dropped 2%. AXA SA fell 4.9%. Shares of Admiral Group PLC slumped 25% in London the biggest loser on the Stoxx 600 and on the FTSE 100 index. The insurance group warned that full-year profit will be at the lower end of analyst estimates if there is no reversal in the fourth quarter of what's been a higher-than-normal level of large claims. HSBC Holdings PLC fell 5.8%.

The bank said third-quarter underlying pretax profit dropped to $2.96 billion from $4.6 billion following lower revenue in the global banking and markets division and an increase in loan-impairment charges, primarily in North America. Other banks followed suit, keeping the pressure on the FTSE 100 index, which closed down 1.9% to 5,460.38.

Shares of Barclays PLC fell nearly 5% and Lloyds Banking Group PLC dropped 3.7%. Mining shares also fell across the board, weighing on London, as commodity prices followed equity markets lower. Shares of Kazakhmys PLC fell 2.9%, Vedanta Resources PLC dropped 2.5% and Antofagasta PLC gave up 2.9%.

Asia-Pacific Stock Markets

Asian markets ended mostly higher Wednesday, supported by embattled Italian Prime Minister Silvio Berlusconi's pledge Tuesday to resign and after China's inflation showed signs of slowing, raising expectations policy may be eased. Berlusconi said he would resign once a controversial package of budget reforms received parliamentary backing. Investors had lost confidence in Berlusconi's government in recent weeks, sending Italy's borrowing costs skyrocketing to dangerous levels.

Japan's Nikkei Stock Average gained 1.2%, South Korea's Kospi edged up 0.2% and Australia's S&P/ASX 200 index rose 1.2%. India's Sensex was flat in afternoon trade. The Hang Seng Index rose 1.7%, while the Shanghai Composite advanced 0.8%, supported by data showing the mainland's consumer price index rose 5.5% in October from a year earlier, slowing from a 6.1% rise in September. Mainland insurance plays advanced on expectations recovering stock and bond markets will improve their investment returns.

China Life Insurance's Hong Kong and Shanghai shares ended up 2.0% and 2.8% respectively. Around the region, risk-sensitive resources plays were broadly higher, with Sydney heavyweight BHP Billiton rising 1.5%, Seoul-listed Posco up 0.8% and Tokyo's Inpex adding 3.0%. Jiangxi Copper's

Hong Kong and Shanghai shares added 2.1% and 1.5% respectively. In Tokyo, Olympus shares closed limit-down level for the second straight session, shedding 20% following a Nikkei report the securities losses the company has admitted to concealing since the 1990s peaked at more than Y100 billion. Medical equipment maker Terumo ended down 2.3% on concerns about potential paper losses on its holdings of Olympus shares.

Heavyweight Softbank added 3.8% on a Bloomberg report the firm, along with China-based Alibaba, is seeking partners to buy U.S.-based Yahoo Inc. In Sydney, consumer discretionary stocks benefited from stronger consumer confidence following the Nov. 1 interest rate cut by the Reserve Bank of Australia. JB Hi-Fi, Harvey Norman, David Jones, Seven Group Holdings, and Myer rose 2.8%-6.4% on the back of a 6.3% rise in Westpac-Melbourne Institute's consumer sentiment index. Meanwhile, Myer Chief Executive Bernie Brooks reiterated guidance for a rise of up to 10% in fiscal 2012 net profit, adding he was pleased with pre-Christmas sales.

Base metals closed lower on the London Metal Exchange Wednesday, as fears mounted over the deteriorating economic situation in Italy. LME three-month copper was 2.2% lower at $7,625 a metric ton at the close of open outcry trading, having earlier hit a two-week low at $7,580/ton. Zinc fell the most, closing at $1,933/ton, down 3.4% on the day. Italian bond yields soared to euro-era highs Wednesday after clearing house LCH.

Clearnet raised the margin required to trade Italy's government bonds. The yield on the benchmark 10-year bond rose above 7%, a level previously associated with Greek, Irish, and Portuguese requests for external assistance. Nymex crude futures settled down $1.06 at $95.74 a barrel on mounting fears over Italy's debt crisis, and stayed down even after news that inventories sank across the board in the United States. Brent crude was at $112.43, down $2.57.

Gold futures fell Wednesday in a rout across equities and many commodities markets as investors worried about the financial health of Italy turned to the U.S. dollar for safety. The most actively traded contract, for December-delivery, fell $7.60, or 0.4%, to settle at $1,791.60 a troy ounce on the Comex division of the New York Mercantile Exchange.